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Monday Market Minutes: Mojo a No Go

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2023-04-30

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Four months into 2023 and global financial markets still can’t rediscover the certainty of January and its strong start to the year seems oh so long ago.

China’s re-opening has been muted, and while tech giants like Microsoft, Alphabet, Meta and Amazon seem to be rediscovering their mojo, it’s all about AI and chatbots rather than jobs and growth and strategy.

While April was up, as was the final week of the month, renewed US fears about banks, possible rate rises from the Fed, European Central Bank and perhaps the RBA this week, and much lower first quarter growth for the US and Europe, all left investors wondering.

The US economy seems to be in a more delicate state than believed and only hanging on growth thanks to strong consumer spending which never lasts, especially when there are rising pressures on jobs and banks.

San Francisco-based First Republic bank remains the weakest link in the US banking and markets.

There’s talk that US regulators, politicians and investors are looking for ways to remove the problem - bids from half a dozen banks including JP Morgan Chase and regional bank PNC were reported for the weekend.

A deal is likely to be announced on Sunday night (US time) before Asian markets open, with the regulator expected to also seize the troubled lender at the same time to allow the sale to occur quickly.

First Republic shares were trading at over $US120 two months ago before Silicon Valley Bank imploded, is now trading at $US3.51, down more than 43% last week and over 75% in the past month.

Thursday and Friday’s strong gains on Wall Street provided a surprise boost to the end of April and set up the ASX to start May with a surge of more than 50 points, according to the Share Price Index futures market on Friday night.

The ASX 200 added 0.23% on Friday and finished April at 7,309.2. That was up 1.83% for the month and 3.8% for the year to date.

But last week started gloomily and only lifted with better-than-expected figures from Alphabet, Microsoft and Meta, Amazon though the 10% surge in the latter’s share price after hours Thursday turned into a 4% loss on Friday after the company revealed a looming fall in growth in its huge cloud computing business.

Investors ignored that correction and the weak PCE data as well as the growing chance of a rate rise this week and pushed share prices higher on Friday.

The Dow closed 272 points higher at 34,098.16 on Friday. The S&P 500 added 0.83% to finish at 4,169.48 and the Nasdaq rose 0.69% to end at 12,226.58, thanks to the better than forecast tech reports (Apple’s figures this week will be the big test).

On a weekly basis, the Nasdaq saw the largest gain at 1.3%, in what was considered Big Tech’s peak earnings week. The Dow and S&P 500 each finished the week about 0.9% higher.

The Dow ended April 2.5% higher, its best monthly showing since January, when the average ended up 2.8%. The S&P 500 logged a 1.5% monthly gain — its second positive month in a row — while the Nasdaq ended the month only slightly higher - due to the gains on Thursday and Friday.

Outside the US, Japanese shares rose 1%, but Eurozone shares fell 0.9% and Chinese shares fell 0.1%. Australian shares fell 0.3% with falls in resources stocks and utilities offsetting gains in telcos, property and IT shares.

Bond yields fell, as did oil, metal and iron ore prices (down more than 17% in April alone). The $A fell despite a slight fall in the $US.

The Aussie dollar lost 1% in April (closing at 66.15 US cents on Friday) - all of it last week.

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